Future Retail said that it is “undergoing serious financial difficulties, particularly in light of the unprecedented impact of the Covid pandemic while the proposed scheme is the only way, it can come out of the situation." It said that any delay in the implementation of the scheme will cause irreparable losses to all stakeholders.
BSE and NSE must not take cognizance of either the Singapore emergency arbitrator’s order that restrained the Future Retail Ltd (FRL) from selling its assets to Mukesh Ambani’s Reliance Industries or Amazon’s letter to the exchanges in which it said Future’s stock exchanges disclosures mislead public shareholders, Future Retail said in a stock exchange filing. The Singapore International Arbitration Centre (SIAC) had on October 25 restrained the deal, through an interim order, signed in August between Future Retail and Reliance Retail Ventures for the former to sell retail, wholesale, logistics, and warehousing units to the latter.
FRL, in the regulatory filing, said it is advised that an emergency arbitrator has no legal status under Part I of the Indian Arbitration and Conciliation Act 1996. Hence, the proceedings before it are “void and coram non‐judice.” FRL added that it has complied with all the requirements of obtaining the requisite approval from Future Coupons and that FRL is “undergoing serious financial difficulties, particularly in light of the unprecedented impact of the Covid pandemic while the proposed scheme is the only way, it can come out of the situation.” It said that any delay in the implementation of the scheme will cause irreparable losses to all stakeholders.
Reliance, which had entered into an agreement in August this year, to acquire retail, wholesale, logistics, and warehousing units of Kishore Biyani-led Future Group’s retail business, would give access to “2,000 Future Group retail stores, covering over 24 million square feet of space in over 400 cities and towns” according to Future Group website. This deal, Amazon felt, if “implemented by completely disregarding the interim (arbitration) award, it will cause irreparable harm and injury to Amazon,” and that Amazon will lose the prospect of becoming the single largest shareholder of the Future Group, which has an “irreplaceable and widespread network” of over 1,500 retail stores, according to the letter sent by Amazon earlier this week to SEBI.
However, according to Future Retail, the emergency arbitrator order was passed “in arbitration proceedings initiated by Amazon by invoking an arbitration clause in a contract to which FRL is not a party. Instead, the only parties to the arbitration agreement are Amazon and various promoters of FRL. FRL is not a party to the arbitration agreement and, as such, could not have been joined as a party to the arbitration proceedings before SIAC.”
FRL added that the emergency arbitrator’s order accepts Amazon’s contention that two separate shareholder agreements, one between Amazon and FRL’s promoters (to which FRL is not a party) and another between FRL and its promoter (to which Amazon is not a party) constitute one single integrated transaction and that by such a composite transaction Amazon has an interest in and rights against FRL. However, this contention raised by Amazon is entirely misconceived, the filing by FRL said.
FRL last year had sold a 49 per cent stake in Future Coupons to Amazon for close to Rs 2,000 crore. While as per the deal, FRL was enabled to put its products on Amazon’s marketplace, it was also agreed that FRL products would also be part of Amazon’s plan to deliver orders in select cities within two hours of the order placed. The deal, on the other hand, gave Amazon a ‘call’ option to acquire all or part of FRL’s shareholding in three-10 years of the deal. The agreement with Reliance, according to Amazon, violated a non-compete clause and a right of first refusal pact that was entered into with the Future Group.
Further, FRL said that though the issue was raised by FRL before the emergency arbitrator, the latter’s order “appears to overlook this illegality by stating that Amazon has not attempted to assert control over FRL without appreciating that once the two agreements are conflated in law the protective, special and material rights granted thereunder would constitute a conferral of “control” in favour of Amazon. Given that the EA Order is premised on violation of SEBI Regulations it cannot and ought not to be accorded any sanctity by SEBI, NSE and BSE.”